Under Donald Trump’s presidency, the US economy has been transformed. In the immediate aftermath of his election, the stock market surged upwards. This surprised some observers. Employment numbers, including numbers for traditionally marginalized groups, have also surged. But since then, the story has grown more complicated. The Trump Administration has begun to use tariffs, an old-school tactic, to protect American industry and achieve increased control over Latin American migration.
In recent weeks, Trump has been able to extract concessions from Mexico by threatening tariffs. That country has promised to take steps to curb migration into the US. Trump’s threatened tariffs against China, however, are having a very different effect. Instead of inspiring Beijing to come to the table and work something out, Trump’s statements have led to threats of retaliation.
Specifically, Beijing has threatened to restrict exports of rare-earth elements to the United States. Rare-earth elements are used in important fields like high tech manufacturing. They’re used for things like coloring glass and batteries. Include Yttrium and Scandium. China is the source of 80% of the US’s imports. America’s position is that China needs it more than it needs China. China’s exports to the US far outweigh its imports. Without sales in the American market, Chinese businesses in all economic sectors will suffer.
When the threatened retaliation was announced, the stock market reacted negatively. The Dow Jones reached a low it hadn’t seen in months. The S&P 500 index also slid by 19 points, the lowest point in two months. Markets in Europe and Asia also saw a significant slide. The FTSE 100 in London dropped by 100 points. The markets in Hong Kong, Japan, Germany, and France also fell. Analysts are split on how strong China’s threat is. There are companies that make rare earth alternatives.
Finance professionals and writers are hopeful that a deal between the Chinese and the Americans can be reached. They point out that with tariffs in place, both countries will lose economic output. The GDP will slip on both sides of the debate. With this knowledge in mind, it’s hopeful that political leaders will work hard to create a fair deal for both parties. A rising tide lifts all boats, after all.
About The Author
Jeff Bishop is a Professional Trader, Entrepreneur, and Founder of popular trading programs Raging Bull Trading and Weekly Money Multiplier. Jeff brings over 20 years of experience working as a trader, and has become known for his expertise in options trading and ETFs. He created Raging Bull Trading in 2010, alongside fellow trader Jason Bond, in order to provide a comprehensive education of trading in the stock market. Jeff Bishop created Weekly Money Multiplier in 2018, and is a trading program focused specifically on options trading.